INTERNATIONAL BUSINESS

INTERNATIONAL BUSINESS; Constellation Brands Agrees To Buy Australian Winery

By JOHN SHAW

Published: January 18, 2003

SYDNEY, Australia, Jan. 17—
Constellation Brands, the American wine, beer and spirits company, said today that it had agreed to acquire the winemaker BRL Hardy of Adelaide, Australia, for 1.9 billion Australian dollars ($1.1 billion) in cash or stock. The combined company would be the world's largest wine producer.

Under the deal, which is subject to Australian government approval, BRL Hardy shareholders would have a choice of 10.50 Australian dollars in cash -- an 11 percent premium to Thursday's closing price -- or an equivalent amount of Constellation stock for each of their shares. The exchange ratio for those preferring stock will be fixed closer to the closing date of the transaction, the companies said. Constellation will also assume about $325 million in debt.

Constellation, based in Fairport near New York's winegrowing Finger Lakes region and formerly known as the Canandaigua Wine Company, is now the No. 2 producer, after E.& J. Gallo. Its wines include mass-market brands like Almaden, Inglenook, Taylor and Paul Masson and premium labels like Simi and Talus. It also sells several well-known liquor and beer brands, including Corona, St. Pauli Girl and Tsingtao.

BRL Hardy is the third-largest company in Australia's rapidly growing wine industry, with labels like Hardys and Banrock Station. The companies formed a joint venture, Pacific Wine Partners, in 2001 to market midprice wines in the United States.

BRL Hardy said that its chief executive, Stephen Millar, would have the same role in the combined group. Richard E. Sands, head of the family that founded Constellation's predecessor company and that still controls 62 percent of the voting rights in the company, is to remain chairman.

BRL Hardy said its board had already approved the deal and that its shareholders would vote on it in March.

Though the global wine industry has been consolidating for years, the deal announced today would be the biggest since a $1.7 billion trans-Pacific deal in the opposite direction in 2000, when the Foster's Group of Australia bought Beringer Wine Estates Holdings.

BRL Hardy's biggest local rival, Southcorp, recently paid $887 million for Rosemount Estates, another big Australian winery, and Southcorp also has an American joint venture partner, Robert Mondavi.

Wine has become Australia's fourth-largest agricultural export by value, at some $1.2 billion a year, and one-quarter of it goes to the United States. Australia has captured 7 percent of the global market and 5 percent of the United States market.

Mr. Millar has publicly predicted that Australia will surpass France and Italy and become the dominant source of imported wine for Americans. Whether that ambition is realistic or not, it is clear that Australian producers enjoy an important advantage: prime vineyard land is much cheaper here than in either Europe or North America.

At home, though, the Australian wine market is becoming glutted, and its exports are meeting with growing competition from other Southern Hemisphere countries with suitable grape-growing land and climates, like New Zealand, South Africa and Chile.